AI Boom Seen by Some Investors as a Déjà Vu of Dot-Com-Era

The current high level of activity within the artificial intelligence (AI) technology sector has some investors worried it will lead to a recurrence of the same cycle that ended with the dot-com-era downfall — a subsequent collapse that was swift and brutal following the soaring rise by more than 500% of the Nasdaq Composite Index over a five-year period. Today, looking back, the early internet hype ultimately proved correct, showing that “big bets on ambitious technologies can pay off in the long run. Despite the failure of many, the dot-com bubble had nevertheless laid important groundwork, the article by the Wall Street Journal paralleling the fiber-optic lines of 2000 to “the electrical grids of the early 1900s, the railroad tracks of the 1800s, the canals of the late 1700s,” which subsequently fertilized new markets. It has yet to be determined if the capital investments being made by AI innovators will lead to productivity advances that power the economy, or elements of what some investors call “good bubbles.” However, the “massive revenue hole that AI companies need to fill to justify their data-center spending,” according to reported writings by Sequoia Capital’s David Cahn, could lead to a speculative shakeout with some AI companies already melting down, yet some will leave behind “brilliant ideas that get picked up by others.”

Source:    https://www.wsj.com/tech/ai/what-the-dot-com-bust-can-tell-us-about-todays-ai-boom-c78482e7